How Membership Dues are Spent at the Kansas Livestock Association (KLA)
The Kansas Livestock Association (KLA) is a non-profit 501 (c) (5) – an agricultural, horticultural, or labor organization. As such, revenue is supposed to be derived primarily through membership dues which are based on the number of cattle ($120: less than 100 head; $370: up to 500 head; $620: up to 1,000 head, etc). Although these dues are not tax deductible at the federal level, the organization reports that 92% of the dues – the portion not directly allocated to lobbying – are deductible as a business expense.
The KLA reports having more than 5,600 members. Based on the most recent financial information reported on the IRS Form 990 (2017) , KLA reports total membership revenue was $2.1 million, which equates to an average membership dues of $375. However, membership dues are not the largest source of revenue for KLA. Instead, the largest source of revenue is from the “beef checkoff program” – a marketing and research program designed to increase the demand for beef through consumer advertising, marketing partnerships, public relations, education, research and new-product development. This program provides more than $10 million to the KLA annually. The KLA reports:
As stated in the Beef Promotion and Research Order, the $1-per-head beef checkoff is due by the 15th of the month following the month of the sale of all cattle sold, including farm- or ranch-hosted production sales offering bulls, registered and/or commercial females or club calves; direct sales of calves and/or feeder cattle without the use of an auction market or reporting order buyer; and any cattle harvested and used for direct-to-consumer retail beef programs.
This program has come under criticism in Kansas because the fee (a federal tax) is being administered by the Kansas Beef Council (KBC) who doesn’t report how the revenue is spent except that it was spent. The problem is that the KBC appears to have been absorbed by the KLA instead of operating as an independent non-profit. Members of the Kansas Cattlemen’s Association (KCA), a rival to KLA are demanding the KBC be decertified until ties are cut to the KLA. Got that? In short, there are two cattle associations in Kansas, one of whom is using another organization to manage the beef check off program but not providing detailed financial information on how the revenue is spent.
So, although the KLA and the KCA are fighting to determine who will administer the $10 million a year program (which would produce more transparency since there isn’t any right now), the revenue ($10 million) and expense ($10 million) of the program are reported in aggregate (no detail) dollars on the KLA Form 990. So, in analyzing how membership dues are spent at KLA, the beef checkoff program dollars and expenses are excluded. However, four other sources of revenue (advertising, convention/trade shows, department expense reimbursement which appears to be from the KCA for staff time used for the the beef checkoff program, and investment income) are included (because corresponding expenses cannot be excluded because they are not matched).
Total revenue (excluding the beef check off program revenue) was $3.6 million in 2017. The four primary sources of revenue were:
- $2.1 million (59% of revenue): Membership Dues
- $ .5 million (14% of revenue): Investment Income
- $ .4 million (11% of revenue): Advertising
- $ .3 million (8% of revenue): Convention/Trade Shows
- $ .3 million (8% of revenue): Department Expense Reimbursement
Total expenses (excluding the beef check off expense) were $3.3 million (92% of revenue) categorized as follows:
- $2.0 million (56% of revenue): Compensation
- $ .6 million (17% of revenue): Kansas Stockman (publication) and other projects
- $ .4 million (11% of revenue): Travel and Conferences/Trade Shows
- $ .2 million(5% of revenue): Professional Fees and Other Expenses
- $ .1 million (3% of revenue): Office-related Expenses
As illustrated above, the largest expense is for compensation for the 27 employees who received $2 million in compensation which equates to an average compensation of $74,100. 8 staff received more than $100,000 in compensation including the most highly compensated employees:
- $459,436: Thomas D Likes, Former Executive Director
- $274,558: Richard A McKee, SVP
- $257,119: Matt Teagarden, CEO
- $166,320: Aaron Popelka, General Counsel
- $154,194: Kevin Thielen, KBC Executive Director
- $143,677: Michael Beam, SVP
- $131,384: Todd Domer, VP of Communications
- $124,384: Clayton Huseman, ED Feedlot Division
All of the most highly compensated employees are male. Collectively, the 8 most highly compensated employees received $1.7 million, which means $300,000 in compensation was paid to the other 19 employees (an average compensation of $15,800).
Using the above information, every $100 in revenue was spent as follows:
-$ 56: Compensation
-$ 3: Office-related Expenses
-$ 5: Professional Fees and Other Expenses
-$ 11: Travel, Conferences and Trade Shows
-$ 75: Subtotal: Compensation, Office, Fees, Travel, Conferences, and Trade Shows
$ 25: Revenue Remaining
-$ 17: Kansas Stockman Publication
$ 8: Revenue Remaining: To Fund Balance
As illustrated ago, $75 out of every $100 was used for compensation (primarily for the 8 most highly compensated employees), office-related expenses, fees, and travel, conferences, and trade shows. $17 out of every $100 was spent on the 10 annual issues of Kansas Stockman.
If the above percentages were applied to the average membership dues ($375), then the membership dues were spent as follows:
-$ 11: Office-related Expenses
-$ 19: Professional Fees and Other Expenses
-$ 41: Travel and Conferences and Trade Shows
-$281: Subtotal: Compensation, Office, Fees, Travel and Conferences and Trade Shows
$ 94: Revenue Remaining
-$ 64: Kansas Stockman Publication
$ 30: Revenue Remaining: To Fund Balance
As illustrated above, membership dues are primarily spent on compensation (again, primarily for the 8 most highly compensated employees), office expenses, fees, travel and conferences. $64 of the $375 was spent on the publication of Kansas Stockman.
Bottom Line: The KLA needs to separate out the beef check off program revenue and expenses or provide detailed information of how the $10 million is being spent. Although the organization reports employing 27 employees, most of the compensation ($1.7 million out of $2 million) is used to compensate 8 males. There are no highly compensated females.
To read the IRS Form 990 (2017), click here.